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Health-care funding provision could face repeal

Felder, who employees 25 workers, said she'll have to hire one more just to keep track of receipts. At $30,000, the extra salary will eat into about 6 percent of her profit. "You plow every penny you can right back into the business," she said. "When I think of everything else I could use that money for, it's huge."

Critics also say it's unclear whether the extra effort will actually help close the tax gap given the challenges of squaring vendors' tax returns with the inevitably different 1099s filed by their business customers.

But a Senate Democratic aide countered that the IRS need not pore over 1099s in search of cheats for the new provision to be effective. The mere fact that vendors know their customers are filing 1099s to the IRS - and providing them with copies - will help vendors keep better records of their income and provide a powerful incentive to fully report it.

Nonetheless, Democratic lawmakers have made clear they are open to at least modifying the 1099 provision. And many are pushing as hard as Republicans to repeal it.

For all the bipartisan consensus, the odds of Congressional action before the November election appear low.

In the House, Democratic leaders squelched an effort by Rep. Dave Camp (R-Mich.) last month to put forth a bill repealing the 1099 provision. Camp would have offset the cost by requiring low-income people to return a larger share of the subsidy they get to buy health insurance in cases where the government mistakenly overpaid them.

Democratic leaders offered an alternative that would have paid for the 1099 repeal by eliminating tax breaks on companies operating internationally - a move unpalatable to most Republicans. The resulting, almost party-line, vote of 241 in favor to 154 opposed was insufficient due to its timing: With the House about to adjourn for summer recess, the bill could only be considered under a "suspension of the rules" requiring a two-thirds vote.

Rep. Scott Murphy (D-N.Y.) has pressed House Majority Leader Steny Hoyer (Md.) to schedule a vote requiring only a simple majority when the House reconvenes. But with Democrats already on record voting to repeal the 1099 provision, the leadership may have less incentive to squeeze a second vote into the pre-election calendar.

Meanwhile, in the Senate, the amendment to repeal the 1099 provision, sponsored by Sen. Mike Johanns (R-Neb.), may turn off Democrats because it would offset the cost by delaying use of a $15 billion fund for preventive health projects and allowing more people to opt out of buying health insurance.

The more modest alternative - offered by Sen. Ben Nelson (D-Neb.) - is a deal killer for many Republicans and even Democrats because it stops short of repeal and offsets the cost by eliminating tax breaks for certain oil companies.

Still, said Coratolo, "The Democrats are really fearful this will become the poster child of the health-care bill. . . . I would be surprised if this wasn't repealed within the year."

The question for supporters of the new health-care law is whether it all ends there.

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